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As many of you are aware, the passing of Check 21 has created quite a
stir within the payment processing arena and those in and around the
banking industry are struggling to understand what the new legislation
means to their business. Yet at this point, it’s hard to know the
effects until we know what the standards will be.
With the bill’s grace period ending October 28, 2004, the standards
around Check 21 are in the midst of being developed. One of the most
crucial standards to be determined is that of image quality. Solutran
believes the standard for image quality in Check 21 should include a
black and white check front and a grayscale back image throughout the
settlement process. Once the item is settled, a black and white imaged
back is sufficient for archive purposes.
Solutran came to this conclusion following analysis of our December
study conducted on the ramifications of capturing black and white versus
grayscale check images. With the banking industry only focused on the
impact of image quality on the settlement between financial
institutions, Solutran wanted to know how image quality would affect the
financial institutions and their corporate clients, as well as our own
clients, in a downstream application like returns.
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Consisting of over 3,000 items from both a major national retailer and
an industry-leading walk-in billpay processor, our test measured which
data was unreadable from black and white check images, but readable on
corresponding grayscale images. The test concluded that over half
(54.9%) of the information was illegible in at least one field on the
black and white images, but readable on the grayscale version.
What does this mean for retailers and other corporations who consolidate
returns? It varies case by case, but the inability to read the back of
a check can have a profound impact on the collection of audit
information and hinder the monitoring and reduction of check fraud. This information, generally printed on the item at the point of sale,
can include the store number, cashier or teller number, and time, date
and type of transaction, all of which are required when the item is
returned to the merchant and it enters the return check consolidation (RCC)
process. Solutran is concerned that unless a grayscale image is the
required standard for the backs of these items, much of this data will
be lost. This loss of information could cause, among other things,
delays in updating negative files, difficulty in reconciling returns to
a store level, and severe increases in adjustments flowing through the
banking and Federal Reserve networks.
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